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polymer distribution | Analysis


Right: The tight credit restric- tions imposed during the


downturn have eased slightly but more frequent,


smaller orders remain the norm


sudden polymer demand or price changes with excellent inventory management and solid relationships built with suppliers and customers.


Traders challenged With the reduced flow of excess polymer volumes in Europe, the traditionally strong position in the market of traders has been challenged. A number of smaller traders have disappeared, while larger traders have aimed to become even larger through consolidation or by stepping into distribution. As a consequence, the dividing line between distributors and traders has become increasingly blurred. Some distributors are getting involved more in trading to secure revenue, while traders increasingly seek to establish regular contractual relationships with suppliers to secure guaranteed volumes in times of material shortage. The tight credit situation seen during the years of the


Below: Further moves towards JIT and minimal inventories throughout the supply chain makes


planning a challenge


recent economic downturn has since eased slightly, but the credit risk continues to be considerable and the financial health of a significant number of plastics processors that have remained in the market may be considered questionable. During the toughest years of 2008 and 2009 insurance companies dramatically reduced the scope of their services. For many distributors the credit limit became the major indicator of how much material a customer could order and this, together with the steep price increases, meant many customers were able to purchase at considerably lower volumes than a few months earlier. The market has still not returned to its pre-crisis level of confidence and it remains much harder to secure funding and loans from financial institutions. Even here, however, distributors have managed to turn challenge into opportunity and for many their margins and overall profitability have improved despite the trend to larger numbers of smaller orders. Most European suppliers seem to have favoured – or aspired to – a pan-European distribution model.


However, in recent years they have been more inclined to pursue a combined model consisting of a pan-Euro- pean distributor complemented with local champions. Suppliers will continue to reduce the number of local players per country to reach a maximum of two. In this respect, Italy with its fragmented regional structure continues to be a challenge. It is not only polymer suppliers that are optimising their networks. Larger-sized distributors are also rationalising their customer networks by targeting specific customer groups (healthcare or automotive sectors, for instance) and even terminating cooperation with customers that are outside this strategic focus, have a poor payment history, or that generate unsatisfy- ing margins. A reduction in exclusivity agreements with suppliers primarily in commodity businesses is another emerging trend, and an increasing number of distribu- tors now establish contracts with two or more suppliers of each polymer type.


A consolidating industry The polymer distribution industry is generally consoli- dating and restructuring, with the leading groups expanding their international/pan-European presence. Some of the major M&A events that have taken place since AMI’s last review of the market include the acquisition of the Azelis polymer distribution business by Gazechim Plastiques (2012), Spain’s Guzmán Group’s purchase of Italian distributors Tecno (2012) and Bilco (2014), Biesterfeld taking over the remaining share in its Nordic joint venture with Fred Holmberg (2014), and the rebranding of Resin Trade to Polydist and its acquisition of Merco Polymers in Benelux in April 2015 and a takeover of another target in France finalised later on in the year. In 2014, the largest ten players in terms of turnover included A. Schulman, Albis, Biesterfeld, Febo, Hromatka Group, Interpolimeri, Nexeo Solutions, Resinex, Ter Plastics Polymer Group and Ultrapolymers. Over the next five years, polymer distribution is expected to grow at double the rate of polymer demand


66 COMPOUNDING WORLD | December 2015 www.compoundingworld.com


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